Budget Forum April 2013

Budget Forum April 2013

Presenters: Helen Benjamin Chancellor Gene Huff Vice Chancellor, Human Resources Jonah Nicholas Director of District Finance Services

Why we re here Our Goal Your Opportunity The Districtwide Potential Promote transparency, provide information and allow for open conversation on the 2013-14 Budget Learn what is going on statewide and locally and how it affects the District Ask questions, provide feedback and get involved Build upon trust, enhance collaboration and strengthen ties between and amongst sites and constituencies Many parts, but one District

Topics The District s Budget Philosophy Our guiding principles Organizational impact Results of our budget philosophy Data on how the District has been affected Current Economics State and national data 2012-13 Budget Update 2013-14 Governor s Budget Looking forward Planning for 2013-14 and beyond Questions and answers

The District s Budget Philosophy Since adopting the SB361 model, the District has budgeted revenue conservatively Apportionment revenue The District budgets growth and COLA revenue, if provided in state projections Lottery revenue The District typically budgets for a low dollar per FTES figure Non-resident tuition There has been growth in this area the past two fiscal years, however, the District uses prior year enrollment to establish revenue projections for each year

The District s Budget Philosophy As a part of our budget assumptions, the District adequately plans for and budgets for expenses in areas outside of our control. In some cases, conservative planning has resulted in unexpected savings. Utilities Due to the light winter, costs in FY 2011-12 were at 93% of budget; this created a $280,000 savings Retiree Health Benefits The pay-as-you-go system, while still costing well over $10 million in FY 2011-12, was at 97% of budget; this created a $380,000 savings Other unforeseen events however, have resulted in expenses beyond our plans Legal Fees On the flip side, in FY 2011-12 legal fees exceeded the budgeted amount by $90,000

The District s Budget Philosophy Overall, the District s budget philosophy is built upon fiscally sound principles that plans with an eye out for future success Realistic, yet cautious, revenue estimates Sensible, but prudent, expense estimates Proper assessment and planning to address future liabilities and obligations These are sound principles which serve the District well

Results of Budget Philosophy 35,000,000 Unrestricted General Fund, Operating Ending Fund Balance 25% 30,000,000 25,000,000 20.95% 19.50% 20% 18.82% 20,000,000 13.84% 15% Ending Fund Balance 15,000,000 10.45% 10% % of Expenses 10,000,000 5% 5,000,000 0 2008-09 2009-10 2010-11 2011-12 2012-13 0%

Productivity Ratios by site 19 18 17 16 15 14 13 12 11 10 CCC DVC LMC District 2008-09 FTES/FTEF 2009-10 FTES/FTEF 2010-11 FTES/FTEF 2011-12 FTES/FTEF 2012-13 FTES/FTEF* Fall and Spring semesters only; does not include summer *Projected

A look at the past The District is a smaller organization than it was before the financial turmoil of the past few years Funded FTES at peak (FY 2007-08): 30,838 Funded FTES in 2013: 27,962 Reduction of 2,876 Overall, the District has 10% fewer FTE employees (includes part-time faculty, fulltime faculty, classified and academic employees) 2,876 FTES equals approximately $13.1 million in apportionment funding reductions 2012-13 salaries projected to be $1.5 million more than last year; still $11.4 million less than in 2009-10; benefits costs continue to rise Total funded FTES fluctuating 2009-10: 29,715 2010-11: 30,084 2011-12: 27,771 2012-13: 27,962* *Projected as of P1 Total Student Count 2009-10: 65,047 2010-11: 59,233 2011-12: 54,880 2012-13: 53,500* *Estimated

Salary & Benefits $160,000,000 $140,000,000 Retiree Benefits $120,000,000 $100,000,000 $80,000,000 $60,000,000 Current Employee Benefits Salaries $40,000,000 2009-10 2010-11 2011-12 2012-13 Cumulative Totals: 2009-10: $148.8 million (Total benefits at 34.4% of salary) 2010-11: $144.4 million (Total benefits at 36.7% of salary) 2011-12: $139.6 million (Total benefits at 41.4% of salary) 2012-13: $140.8 million (Projected total benefits at 41.9% of salary)

Better times ahead Proposition 30 passed Stable funding for community colleges for five years Gives time for economy to grow Demonstrated the voters dedication to fund education Governor Brown s commitment to restoring education New money is proposed for education in the FY 2013-14 budget

Economics State of California

Economics State of California National Data Unemployment Rate: Fell 0.7% in 2012 Unemployment Rate currently at 7.7% Foreclosure Rate: 1 in 849 as of February 2012 Foreclosure Rate was 1 in 637 a year ago California Data Unemployment Rate: Fell 1.4% in 2012 Unemployment Rate currently at 9.8% Bay Area unemployment rate at 7.3% Foreclosure Rate: 1 in 757 as of February 2012 Foreclosure Rate was 1 in 283 last year Source: Bureau of Labor Statistics

Results of the improving economy One year ago: Two years ago: $9 billion deficit $25 billion deficit

Statewide Long-Term Economic Outlook According to the Legislative Analyst s Office Statewide Surpluses Projected Over the Next Few Years Based on current law and our economic forecast, state expenditures are projected to grow less rapidly than revenues. Beyond 2013-14, the Legislative Analyst s Office is projecting growing operating surpluses through 2017-18. Their projections also show that there could be an over $1 billion operating surplus in 2014-15, growing thereafter to over $9 billion surplus in 2017-18. This outlook differs dramatically from the severe operating deficits that have been forecast in reports over the past decade. -LAO, 2013-14 Budget: California s Fiscal Outlook

District Finances

2012-13 Budget Update Adopted Budget Was proposed with a structural deficit (revenues less than expenses) of approximately $1.2 million This was based on hedging the risk of Proposition 30 s impact if not passed by voters Prop 30 Approved by voters in November Increases sales tax by ¼ percent for 4 years. For every $100 spent on sales tax eligible items, an extra 25 cents is collected. In effect through 2016 Increase income taxes for those making $250,000 or more per year for 7 years (increases range from 1% to 3%). In effect through 2018 Projected to raise approximately $6 billion annually Results in basically a Status Quo budget for community colleges District Impact Our FTES target moved from the hedge position of 27,200 to our revised target of 27,962 Approximately $3.4 million was incorporated through our revenue allocation model to all the sites as a result of the change.

Prop 30 Map Final Results 55.3% Yes 44.7% No Contra Costa County Results 60.6% Yes 39.4% No

2012-13 Budget Update Parcel Tax Failure FTES The District sought voter approval for Measure A, a parcel tax of $11 for six years A two-thirds majority (66.67%) was required for passage. The measure was narrowly defeated, with 66.16% voting in favor of the parcel tax Passage would have provided approximately $3.9 million annually to the District Student demand has softened, especially in northern California where the economy is better than in southern California Fill rates and productivity are down; though productivity is still at historical highs. Waitlists are also not as large The District is struggling to reach its target base of 27,962 FTES and is looking at borrowing FTES from summer or going on stability if necessary Districtwide and college-specific marketing has been planned. Efforts will target summer session at each location to restore sections back to where they were a few years ago

2012-13 FTES Challenges Shortfall District is experiencing a shortfall and is projecting to be 838 resident FTES short of its target CCC is projecting a shortfall of 394 FTES DVC is projecting a shortfall of 261 FTES LMC is projecting a shortfall of 183 FTES

2012-13 FTES Challenges Options Go on stability, meaning the District does not reach its funded FTES base The District retains its base funding for FY 2012-13 Has three years to return to its funded base before a permanent loss in FTES Will forgo any growth or restoration funding available in FY 2012-13 Borrow from Summer 2013 FTES borrowing is done by recognizing eligible summer session FTES in the previous fiscal year This occurs when the census date is in one fiscal year but the ending date is in the subsequent fiscal year The District would be able to capture available growth funding Would have to make-up the summer FTES in FY 2013-14 that were advanced to FY 2012-13

Decision Impact on FY 2013-14 Budget Impact The colleges are funded in our revenue allocation model by FTES The strategy that is chosen (borrowing or stability) will have an impact on the amount of revenue that each site receives The strategy also affects the number of courses each college offers Size Impact If the District borrows, the colleges will run more courses in FY 2013-14 to pay back the borrowed courses from Summer 2013 Whichever strategy the District ultimately decides upon, the District will need to grow in FY 2013-14 This will require the help of all employees (instructional and noninstructional); we all have a stake in student success Decision will be made in the coming months

Other FY 2012-13 Highlights Non-resident students Estimated to serve 2,370 non-resident and international students in FY 2012-13 These students provide approximately $11 million in local revenue for the District Grants Design it-build it-ship it A four-year, $14.9 million grant under the Department of Labor s Trade Adjustment Assistance Community College Career Training (TAACCCT) initiative The District is the lead in a consortium which includes Alameda, Berkeley, Chabot, Laney, Merritt, Ohlone and Solano colleges Will strengthen career pathway training in advanced manufacturing, transportation/logistics, and engineering. Goal is to build a stronger regional workforce system that helps East Bay residents access training in these in-demand industries

Highlights of Governor s 2013-14 Proposed Budget What is NOT in Governor Brown s 2013-14 Proposed Budget? A deficit Trigger cuts Highlights $97.7 billion general fund balanced budget Increased funding for all levels of education Dramatic proposed policy changes Higher Education UC and CSU are proposed to each receive $125 million in general fund increases The community college system is proposed to receive $196.7 million in increased apportionment funding Unclear how this new money will be distributed. It could come as growth/restoration or as COLA The District s share of this is approximately $3.5 million, a conservative figure If all the funding came as growth/restoration, it would be equivalent to 767 FTES

Governor s Proposed Budget Highlights Payback of system deferrals $179 million is dedicated towards buying down the deferrals; this will lower the system amount from $801 million to $622 million Helps cash flow and interest income for all Districts The District will see its 2013-14 deferral reduced from $22 million to $17 million No increase or restoration for categorical funding Some of the $196.7 million in new system money could be utilized to help restore these programs

Governor s Budget Other Items $49.5 million from Prop 39 to support energy efficiency efforts Prop 39 repealed an existing law that gave out-of-state businesses an option to choose a tax liability formula that provided favorable tax treatment for businesses with property and payroll outside California Unclear how this funding will be distributed, but is more and more looking like it will be competitive $16.9 million to enhance online education and $300 million to shift responsibility of Adult Education from K-12 to community colleges Governor is very light on details in these areas $300 million for Adult Education is less than a third of the dollars that K-12 was given to administer the program Assembly Budget Sub-Committee rejected the Adult Education Proposal

Policy Issues in Governor s Proposed Budget Five-year phase in to change apportionment funding to course completion rather than census date enrollment 90-unit cap above which no state support will be provided to students Students on Part B BOG Fee Waivers will be required to complete the federal FAFSA Would have a huge impact in our funding and change the way we do business There are programs that require greater than 90-units; about 8% of students system-wide currently have over 90 units Proposals ONLY! All still under discussion in Sacramento.

Census Change Governor Brown s proposal would fund community colleges on how many students completed a course instead of how many students are present at census date According to Governor Brown s proposal, any funding loss would be returned to the colleges to support student success initiatives Unclear how this would work Governor Brown has proposed this before with no success

90 Unit Cap This cap would impose non-resident rates on resident students who exceed 90 units For FY 2013-14, this would be $251 per unit Data suggests about 8% of students in the community colleges are above this threshold Some programs are greater than 90 units Retraining students in different fields could become problematic Difficult to administer

Board of Governor s Fee Waiver Family Size 2011 Income 1 $16,335 2 $22,065 3 $27,795 4 $33,525 5 $39,255 6 $44,985 7 $50,715 8 $56,445 Each Additional $ 5,730 Family Member Filling out a FAFSA will be required to qualify Is an additional barrier for students Will require both parent s income to be part of the calculation

Latest News Waiting for the legislature to give its feedback on the Governor s proposal There will be some changes proposed between now and the May revise The State Chancellor s Office is working on extracting details from the Governor s Office on his January 10 proposal How would Adult Education work and how would the funding be distributed? Does Prop 39 money get distributed proportional to size or will it be competitive?

Looking Forward

Mission Statement The mission of the Contra Costa Community College District is to attract and transform students and communities by providing accessible, innovative and outstanding higher education learning opportunities and support services.

Budget Development Considerations 50% law Faculty Obligation Number Other State/Federal Mandates Participatory Governance Collective Bargaining Fulfilling our Mission

Planning for 2013-14 and beyond Budget development is ongoing and assumptions for FY 2013-14 Tentative Budget have been reviewed through the participatory governance model We are assuming that 2% in available FTES growth funding will be provided from the State This would be approximately 555 FTES or $2.5 million in funding for the District Meeting FTES targets however, is an on-going concern Marketing efforts designed to make residents aware that the colleges have capacity will be undertaken The colleges will be innovative in their scheduling and change as needed to meet the demands of their unique populations Governing Board is interested in running a local capital bond measure in 2014

Long-Term Concerns Demand for our courses Escalation in health and welfare costs Unfunded liabilities Load Banking and Vacation approximately $10 million Retiree Health Benefits approximately $174 million Scheduled maintenance of our facilities Have not received state funds since FY 2008-09 The eventual end of the Prop 30 tax increases (2016 and 2018) All of these will be covered through the annual budget development process done through participatory governance

Questions?